Late rent payments: at their best, they’re a mild nuisance to commercial property landlords, but leave the problem to grow and the consequences can soon stack up to become financially devastating. But as I’ve learnt in my own experience, it doesn’t have to be this way.
A Chain of Consequences
Although not being paid on time is certainly a headache for many landlords – with profit margins taking a hit and cash flow stalling – the ramifications are actually more far-reaching than first assumed. This is because rent ultimately ensures landlords meet the financial commitments which they’ve made to the bank.
The longer a commercial property tenant delays their rent payment, the greater the pressure builds for landlords to meet mortgage obligations. If delays continue, landlords soon find themselves in arrears, with the threat of foreclosure looming over their heads.
This issue was particularly visible during the 2007/2008 recession, when multiple big-named tenants found themselves falling into administration. With tenants leaving and no rental income to speak of, landlords had to pay the mortgage from their own pockets. Of course, this is usually a sizeable amount, leading to defaults on the mortgage, and eventually commercial properties being seized.
In short, what may seem like a small hiccup affecting one month’s cash flow can quickly snowball into a disastrous financial crisis which puts a landlord at risk of losing both their business’ and personal assets. There is, however, a way to prevent this from happening.
Breaking the Problem Down
As with many things in life, prevention is the key to letting late payments get out of control. As a first port of call, the landlord-tenant relationship must be successfully maintained, so that a culture of mutual respect can develop. With this respect and trust, landlords can be confident that tenants feel emotionally obliged to pay on time and in full. It’s amazing the benefits such a simple solution can yield.
Even earlier than this stage, it pays to run credit checks on potential tenants before they move into a property in order to guarantee that the business has the funds to pay on time. This will prevent headaches in the future – after all, if they can’t pay and they’re evicted, the landlord is still left footing the bill until they can find a replacement, when instead they could have a tenant who pays on time from day one.
If prevention has failed and a payment is late for whatever reason – there are sometimes genuine reasons which are unavoidable – you can leverage the relationship to work out when the money will be coming in, and successfully chase for it.
Minimising the Damage for Landlords
Late payments – and the consequences which occur when the issue is mishandled – are an unpleasant business, and there is sometimes a reluctance to chase for money. Unfortunately, landlords will quickly feel the squeeze when they’re not receiving a return on investment or any income.
With extensive experience in managing landlord-tenant relationships in order to ensure everybody is happy, Carlton Park is well-positioned to handle the situation on their behalf. We help our clients to secure their rental income on time, every time – to everybody’s benefit.
So, if you’re the landlord of a commercial property and you’re struggling with collecting rent payments on time, and you’re worried about the situation getting out of hand, know that there’s help available.
All of this can seem daunting, but with Carlton Park management fighting your corner, getting paid on time and protecting your property investment is no longer an impossible task. To find out more about our rent collection service, head to our website. Otherwise, please feel free to get in touch.